CH: Consumer Price Index

Thu Apr 05 02:15:00 CDT 2018

Consensus Actual Previous
M/M % change 0.3% 0.4% 0.4%
Y/Y % change 0.7% 0.8% 0.6%

Consumer prices rose a monthly 0.4 percent in March. The increase was at the upper end of expectations and firm enough to lift the annual inflation rate by a couple of ticks to 0.8 percent. This was the first increase in the yearly rate in 2018 but still only reversed the fall seen in January/February.

In fact, the acceleration was once again essentially attributable to imported products where prices were up 0.9 percent on the month (and 2.0 percent on the year). Domestic prices advanced only 0.2 percent to stand just 0.4 percent above their level in March 2017.

The monthly headline gain was dominated by a largely seasonal 5.2 percent spike in the cost of clothing and shoes; this alone added nearly 0.2 percentage points to the overall change. Leisure and culture (1.6 percent) also benefitted from seasonal strength while alcohol and tobacco (minus 0.9 percent) saw the steepest decline.

As a result, the core CPI, which excludes fresh food and energy), climbed a slightly sharper 0.5 percent versus mid-quarter. This nudged the annual underlying rate just a tick higher to a still very subdued 0.6 percent. Accordingly, there is no reason for the SNB to be complacent about getting inflation back towards the 2 percent mark anytime soon. Monetary policy will remain very accommodative for a long while yet.

The consumer price index (CPI) is an average measure of the level of the prices of goods and services bought for the purpose of consumption by Swiss households. Monthly and annual changes in the CPI provide widely used measures of inflation. The policy target measure for the Swiss National Bank (SNB), the annual CPI rate can be distorted by swings in prices amongst the more volatile subsectors and the CPI excluding fresh food and energy is used as a better guide to underlying short-term trends. Although not a member of the Eurozone, a harmonized index of consumer prices (HICP), measured according to Eurostat's procedures, is also published alongside the CPI.

The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments. Inflation (along with various risks) basically explains how interest rates are set on everything from loans to notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion. By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.